The deal produces a bonanza for the 160 members of the Attenborough, Biggs-Davison, Hodder-Williams and other families who own Hodder. They find their shares worth 10 times more than a few months ago.

The takeover creates the UK's biggest quoted pure book publisher with a stock market value of about pounds 100m. It will be renamed Hodder Headline.

Headline, a fast growing middle- brow publisher founded seven years ago, is also raising pounds 12.8m through a rights issue to pay for the pounds 3.5m transaction costs and redundancies and investment in new authors.

It would not say how many jobs might be lost, but insisted Hodder's publishing operations would continue as distinct businesses.

It is offering 37.5 new shares, worth pounds 108.75 at the last traded price, for each share in Hodder. Hodder shares were changing hands as recently as last October at pounds 9.50. One person close to the deal said: 'There are going to be some very happy people in the shires tonight.'

Headline has received irrevocable undertakings to accept in respect of 76.8 per cent of the Hodder shares.

There is a partial cash alternative, so that Hodder shareholders will end up owning between 20 and 30 per cent of Hodder Headline. Tim Hely Hutchinson and his father, the Earl of Donoughmore, stay as chief executive and chairman of the enlarged group.

Patrick Wright, chief executive of Hodder, becomes deputy chief executive of Hodder Headline. Philip Attenborough, chairman of Hodder, becomes deputy chairman and receives pounds 110,000 damages for termination of his service contract and a pounds 67,000 top-up to his pension.

The purchase price is about 65 times earnings for the year to June 1992 but less than one times sales of pounds 55.6m. Hodder's pre-tax profits have improved from pounds 1.05m to about pounds 2.2m in the year ending shortly.

Mr Hely Hutchinson, whose pay is to be raised from pounds 102,555 to pounds 140,000, said he believed Hodder's net profit could be lifted to 12 per cent of sales. He pointed to the strong backlist of authors, who include John Le Carre and James Clavell.

A few departments, such as finance and distribution, would be merged. 'But we want to continue with medium-sized publishing divisions that really know their own business rather than be one big amorphous mass.'

Dealings in Headline shares, which were suspended at 290p, will resume this morning. Mr Hely Hutchinson said the deal would dilute earnings in the current year but would strongly enhance them later.

The rights terms are four new shares at 240p for every nine held. Rothschild is underwriting this and the partial cash offer of pounds 90 for every third share.